The reason for a thriving banking system in Hong Kong is mostly organized and effective regulation. Financial institutions in Hong Kong are controlled and regulated by the Monetary Authority (HKMA). The task of overseeing securities and futures transactions belongs to the Securities and Futures Commission (SFC) in HK. This brief review will be surely useful for those intending to become a financial services provider in Hong Kong.
Banking sector of Hong Kong
For this jurisdiction financial institutions are highly concentrated. The proof is the fact that over 70% of the world’s biggest banking institutions own a branch in Hong Kong. One of the attractive reasons for them is an opportunity to offer multiple currency accounts (max. of 10 currencies).
Many advantages are here to enjoy for banks operating in Hong Kong: for example, extensive security, high level of anonymity, no need to have an agreement on the information exchange. Customer account servicing receives a lot of attention, too.
Due Diligence and KYC format present certain requirements about the amount of authorized capital and assets for participating in the Hong Kong banking system. As a matter of fact, the regulators have a condition about the bank’s name for it to be allowed in Hong Kong. The name needs to state explicitly that the institution specializes in financial services. Otherwise, if the name is too abstract, the registration would not be allowed.
Generally, we can distinguish three types of banks in Hong Kong. Firstly, the Western banks that use Hong Kong to operate in Asia. Secondly, there are “global-local” banks or big Mainland banks. Examples of this category are HSBC or Standard Chartered, viewed as the British empire remains. The last category is the small local banks that work in a very competitive atmosphere.
Obtaining a financial license
The authorization from the regulators is a must for being able to start a financial business in Hong Kong. For obtaining a banking license in Hong Kong, applications are submitted to HKMA. The regulator grants both full licenses or part-licenses for providing banking services.
Businesses that work with securities and futures must apply to the Securities and Futures Commission of Hong Kong.
By the way, it is not necessary for the financial services companies to have a license to operate in Hong Kong. There are certain services that can be provided without authorization like investment consulting, investment fund management, insurance service, brokerage, and a few others.
For additional information or assistance, COREDO offers consultation of law specialists about the legal framework for financial services in Hong Kong. We will also support you while obtaining a banking license there.